It is to be noted that If Zada challenges the purchase as going beyond the powers of the corporation: she will win because purchasing the refrigerator is an ultra vires act. (Option D)
Ultra vires acts are any acts that go beyond a corporation's power to conduct. Acts of ultra vires extend beyond the powers expressly granted in a corporate charter or by law. This can also apply to any behavior that the company charter expressly prohibits.
The Memorandum and Articles of Association, which serve as the company's constitution, outline the company's main goals, powers, scope, and areas of activity, both internal and external. As a result, a firm can do anything that falls within the scope of the authorities indicated in the Memorandum.
It also has the implicit authority to conduct anything that is tangential to its primary goals. If the corporation goes above the authorities indicated in the Memorandum, it will be considered an Ultra Vires Act.
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Full Question:
Mork and Mindy create a for-profit corporation, Mork’s House, to provide shelter to homeless and abused women and children. Mork and Mindy are shareholders of the corporation. Zada is also a shareholder in the corporation, along with five others. Douglas manages the day-to-day operations of the corporation. The bylaws of the corporation provide that the corporation is established for the sole purpose of providing shelter, food, and care for homeless and abused women and children and for no other purpose. When the refrigerator in Mork’s House stops working, Douglas purchases a new refrigerator from Home Depot and charges it to the corporation. If Zada challenges the purchase as going beyond the powers of the corporation:
a) she will win, because the bylaws do not address purchases of appliances.
b) she will lose, because purchasing the refrigerator falls under the implied powers of the corporation.
c) she will lose, because purchasing the refrigerator is an express power of the corporation.
d) she will win, because purchasing the refrigerator is an ultra vires act.
